I am pleased to appear before you today to present the Department of Education's fiscal year 2001 budget request for Postsecondary Education. Over the past seven years the Administration has garnered unparalleled support for access to postsecondary education through increased investment in student aid and education tax credits, and through innovative new programs to assist disadvantaged and low-income students prepare for, and succeed in, postsecondary education.

In today's information-based economy and high-tech, global economic environment, postsecondary education is becoming even more essential for individual economic success and career advancement. In the 21st century, America's continued economic productivity and social development as well as our international leadership and long-term security will depend increasingly upon our ability to make postsecondary education accessible to all of our citizens. However, for a large number of families, paying the price of a college education is a major concern. Our fiscal year 2001 budget responds to those concerns.

To help make college more affordable for all Americans, we are proposing to increase student financial aid significantly, especially grant aid and work-study funding. Our budget also provides substantial new support for GEAR UP and TRIO. Within TRIO, we are proposing a new College Completion Challenge Grants program to help improve the college-attendance and college-completion rates among disadvantaged and low-income college students. We are providing increases for programs that support minority-serving institutions, and are proposing an innovative new Dual Degree program that would increase the number of minority students entering fields in which they are underrepresented by affording them the opportunity to earn dual degrees. In addition, our fiscal year 2001 budget increases support for Preparing Tomorrow's Teachers to Use Technology to ensure that our teaching force is prepared for the technological age. We are also requesting increased funding for distance education and for child care services for disadvantaged parents to better serve today's students.

STUDENT FINANCIAL ASSISTANCE

The Administration has made great strides in opening the doors of college to low- and moderate-income Americans. Since 1993 we have more than doubled the amount of student financial assistance available. The Administration's fiscal year 2001 budget continues to build on past successes and further increases student financial assistance and tax credits for postsecondary education. Our request expands the overall amount of aid available to $54.2 billion, an increase of 5.5 percent over the fiscal year 2000 level. The total number of student aid recipients would increase by 217,000 to a total of 8.6 million, a major increase in the number of students receiving financial assistance.

Studies show that grants have a more positive effect on increasing retention than loans, especially among low-income students. The proposed increase in grant funding is an important part of the Administration's strategy to reduce the gap in completion rates between low- and high-income students. Our fiscal year 2001 budget increases the Pell Grant maximum to $3,500, an increase of $200 or 6 percent over fiscal year 2000. Overall, 64 percent of students are enrolled in institutions with tuition and fees below $3,500. Among students enrolled in two-year public colleges, 92 percent are enrolled in institutions with tuition and fees below $3,500. This will provide a real increase for most students to help them cover the cost of tuition and fees, room and board, books, and other education expenses. The Administration is also requesting an increase of $60 million, close to 10 percent, for the Supplemental Educational Opportunity Grant program to serve an additional 64,000 needy students. With the required institutional match, this would provide $875 million in grant assistance for an estimated 1.2 million students. We are also continuing support for the Leveraging Educational Assistance Partnerships (LEAP) program at $40 million.

Work-study is also an important part of the Administration's access and retention strategy. In fiscal year 2001, we are proposing a $77 million increase in Work-Study, for a total of over $1 billion, to sustain the President's commitment to provide a million students with the opportunity to work their way through college. To help meet national goals in reading and math, the Department encourages colleges to participate in the America ReadsChallenge and America CountsChallenge by waiving the required 25 percent match. Our budget also continues support for Perkins Loan Capital Contributions at $100 million, and increases the Loan Cancellations funding by $30 million to address the growing number of cancellation entitlements resulting from expanded eligibility provisions in the Higher Education Amendments of 1992 and 1998.

In fiscal year 2001, the Administration is proposing a number of reforms to the Federal Family Education Loan (FFEL) program to ensure equitable financial returns among lenders, improve default recovery efficiency by cutting costs, and return excess Federal funds held by guaranty agencies to the Treasury. Under current economic projections, the change in the interest rate index from the prior T-bill -based formula to the 3-month commercial paper rate authorized in the Ticket to Work and Work Incentives Improvement Act of 1999 increased lender yields by 11 basis points and reduced lender hedging costs. To reestablish the level of lender subsidies agreed to in the Higher Education Amendments of 1998, the Administration proposes to eliminate this 11 basis point increase and lower lender subsidies by another 20 basis points, to account for the reduced hedging costs. The Administration also proposes to eliminate unnecessary interest subsidies on certain loans funded through tax-exempt securities.

To bring greater efficiency to default collection, the Administration proposes to reduce the percentage that guaranty agencies may retain from 24 percent to 18.5 percent, and to reduce the guaranty agency retention from 24 percent to 12 percent on defaulted loans that are converted to Consolidation Loans. The greater regulatory flexibility available to guaranty agencies under voluntary flexible agreements is reducing the need to hold Federal funds in reserve. Consequently, the Administration is proposing an accelerated schedule for the return of excess Federal Fund reserves to the Treasury. We continue to review these numbers, and will recommend other changes as market conditions change. As required by statute, the Department has established a market mechanisms study group to provide guidance in this regard.

HIGHER EDUCATION PROGRAMS

Access and Retention

Research shows that in spite of the increases in need-based financial aid, significant differences in college participation and graduation rates continue to exist across income groups. Nearly half of all low-income students enrolled in a four-year college or university will drop out of their program by the end of the second year, as compared to only 27 percent of higher income students. To strengthen retention and success rates among these students, the Administration has developed a strategy that includes increased grant assistance and additional support for programs that target at-risk students.

Our fiscal year 2001 budget includes $725 million for the Federal TRIO programs, an increase of $80 million over fiscal year 2000. Our request for TRIO includes $35 million for a new College Completion Challenge Grants initiative within the Student Support Services program. This initiative is designed to increase retention rates by providing eligible students with intensive summer programs and additional grant assistance during their first and second years of college - the years when the dropout rate among disadvantaged students is the highest. An increase in TRIO funds would also enable the Student Support Services program to intensify services to students. A national evaluation of Student Support Services found that the amount of services a student receives has a positive impact on student outcomes. We are also proposing to support work-study opportunities under Upward Bound and continue a new technology initiative to help bridge the digital divide.

The Administration is proposing a $125 million - 62.5 percent - increase for GEAR UP for a total of $325 million. This funding level would support early college preparation and awareness activities for

1.4 million high-poverty elementary and secondary school students by giving them the skills and encouragement needed to successfully pursue postsecondary education. GEAR UP complements TRIO by targeting students in the earlier grades and using different strategies to help them prepare for college, including working with entire grades or cohorts of students, partnering colleges with low-income elementary and secondary schools, providing scholarships for college, and leveraging State and local resources through matching funds.

To complement these programs, the Administration is proposing an overall increase of $36 million - 13.9 percent - in the Title III Aid for Institutional Development programs to strengthen institutions that serve large numbers of low-income, disadvantaged, and minority students. These funds would provide increases and continued support for minority institutions to improve academic quality, institutional management, and fiscal stability, and make more effective use of technology. In addition, we are proposing a $20.25 million increase for Title V Developing Hispanic-serving Institutions for a total of $62.5 million. Our request supports the Administration's Hispanic Action Plan to increase educational opportunities for our nation's fastest growing minority population.

In an effort to increase the number of minority students entering fields in which they are underrepresented, the Administration is proposing $40 million for a new Dual Degree Programs for Minority-Serving Institutions. This program would support partnerships between minority-serving institutions and research universities to strengthen curriculum and enhance student opportunities at minority-serving institutions. Students at minority-serving institutions would be able to earn degrees from both the minority-serving institution and the partner research institution over five years.

Our fiscal year 2001 budget also includes $15 million for Child Care Access Means Parents in School - a three-fold increase over fiscal year 2000. Lack of affordable and convenient childcare services is a significant barrier to postsecondary education for many low-income parents, and it is estimated that only a small percentage of the students who need this service are being served. Our budget would support new awards at 150 additional institutions and would increase access to postsecondary education for approximately 3,550 low-income parents.

To encourage academic excellence and to help ensure that America has the high level of skills and knowledge needed in the 21st century, we are proposing $10 million for the Javits Fellowships program and $31 million for Graduate Assistance in Areas of National Need. Furthermore, as our elementary and secondary school population continues to grow, increasing numbers of students will be graduating from high school. The Administration is requesting an increase of $1.14 million for a total of $41 million for the Byrd Honors Scholarships program in 2001 to help more high achieving students attend and pay for college.

Quality and Innovation

Our fiscal year 2001 budget continues support for innovation and qualitative improvement in postsecondary education, and promotes programs that prepare our students for the technology-based global economy of the new century. In fiscal year 2001, we are requesting $98 million to maintain the Administration's investment in teacher recruitment, preparation and support that is essential to promote a high quality learning environment to address the expanding school population. To complement this investment, we are requesting $150 million for Preparing Tomorrow's Teachers to Use Technology, double the fiscal year 2000 appropriation. In an increasingly technological age, this is the only Federal funding available to ensure that teacher preparation programs integrate the use of technology in their curriculum.

Our budget request includes $31.2 million for the Fund for the Improvement of Postsecondary Education (FIPSE) to continue support for exemplary innovative reform and improvement projects. Under the FIPSE Comprehensive Program, these projects develop and disseminate best practice strategies in such important areas as student access and persistence, curriculum quality, and cost containment. Our request would continue support for academic mobility and student exchange programs with Canada, Mexico, and the European Union, and would support a new exchange program building on these successful models.

The Administration is requesting $30 million for fiscal year 2001 for Learning Anytime Anywhere Partnerships (LAAP), an increase of $6.7 million over fiscal year 2000. LAAP addresses qualitative innovation by helping institutions make more effective use of the Internet and other technologies in developing distance education programs, and it improves access by reaching both underserved populations and geographic areas. Our request would support a third round of projects that promote educational quality, resource sharing and coordination, and innovation in teaching and student support. Our budget also includes $5 million to continue support for Demonstration Projects to Ensure Quality Higher Education for Students with Disabilities. This program helps to ensure that students with disabilities receive the high quality postsecondary education that is necessary for success in today's job market.

In fiscal year 2001, we are proposing to continue support for programs that help to develop and maintain our knowledge of international and foreign languages that are essential to our Nation's continued progress, security, and economic well being as well as to America's international leadership role. Our support for international education has failed to keep pace with the increasing importance of foreign languages and international competence in today's global economy. Therefore, the Administration proposes to increase support for the Overseas programs (Fulbright-Hays) by $3.32 million to a total of $10 million to restore some of the purchasing power that these programs have lost over the last several decades.

To help the Department obtain the data needed to comply with the Government Performance and Results Act of 1993 and to carry out evaluations required by the Higher Education Act, the Administration is requesting $3 million, the same level as appropriated in fiscal year 2000.

CONCLUSION

In today's information-based global economy, education is not only pivotal to our Nation's continued success and well-being, but is increasingly becoming the fault line between those who will prosper in the new economy and those who will be left behind. Our fiscal year 2001 budget is based on a comprehensive approach to ensuring that everyone is prepared for, and has access to, high quality postsecondary education and lifelong learning.

My colleagues and I will be happy to respond to any questions you may have.